• Tax crime explained

    Tax crime occurs when people abuse the tax and superannuation systems through intentional and dishonest behaviour with the aim of obtaining a financial benefit. It encompasses a broad spectrum of non-compliant activity that can result in criminal sanctions, such as fines or imprisonment.

    This criminal behaviour ranges from deliberate offences, such as failing to report cash wages in order to avoid tax, to the use of complex offshore secrecy arrangements to evade tax.

    Tax crime poses a risk to the community not just from the loss of revenue but because of the links to organised crime, identity crime and money laundering, which can have far-reaching effects for victims.

    We take all forms of tax crime seriously.

    Those who commit serious tax crime can expect to be prosecuted by the Commonwealth Director of Public Prosecutions. In addition to recording criminal convictions, the courts may impose security bonds, community service orders, fines, additional penalties and, for some offences, prison sentences.

    Summary offences under the Tax Administration Act 1953 are prosecuted by the ATO. These include failing to lodge returns or keep records, making false or misleading statements and failing to respond to ATO questions when required to do so.

    Where prosecution action is not pursued, administrative penalties for failing to meet tax obligations can be imposed.

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    How we deal with tax crime

    We have a range of strategies that work together to provide a strong tax and super system that is an unattractive target for tax crime:

    • systemic solutions that remove the opportunity for people to commit crime and avoid detection
    • ‘whole-of-crime’ treatment approaches that drive long-term changes in participation in the tax system by removing the opportunity to repeat an offence
    • taking firm action against people who are not doing the right thing and removing the profit from participating in tax crime.

    Strengthening the system

    Our ability to detect and deal with tax crime is constantly evolving, supported by advances in technology, law reform and collaboration with a growing network of local and international partners.

    Tax evaders may find new ways to cheat, but we find new and more effective ways to protect the tax system for the wider community.

    It is not just organised criminals that need to worry about our scrutiny – every tax evader who thinks their financial activities are invisible to us should think again.

    Technological advances

    Advances in technology allow us to continuously strengthen the security and integrity of our system controls and data holdings. Sophisticated technology, including data modelling, tracking and matching, ensures illegal behaviour is identified earlier.

    We have a range of analytical models that detect incorrect or potentially fraudulent information provided to the ATO and other Australian and international agencies. These models are continually refined to improve detection and to allow us to capture new and emerging frauds.

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    Law reform

    Promoting reform is one of our fundamental strategies. Australian law – and our own administrative frameworks – set the boundaries for what we can do. As the world changes and technology transforms the way everyone manages their affairs, we advise the government on law reform that will limit opportunities for tax crime. We also advise the government about law reform that will allow us to share more information with other agencies, and so meet the challenges of emerging technology. These actions help us to take a whole-of-government approach to combating crime.

    We are also making changes to strengthen the general anti-avoidance rule so that the law is applied as intended.

    Working in partnership

    Australian law enforcement and other government agencies, industry and the ATO's overseas counterparts are increasingly sharing data, intelligence and expertise in the fight against serious tax crime.

    At a national level, the ATO cooperates with other government agencies to investigate serious breaches of tax law. We also participate in multi-agency task forces involving national and state and territory agencies.

    Transnational transactions are a feature of the global economy. Revenue collection agencies around the world are increasingly sharing intelligence and expertise in financial investigations in the fight against tax evasion and organised tax crime.

    By working together and sharing information we are able to bring the full capabilities of a multi-agency approach to audits, investigations and prosecutions in order to address the threat that tax crimes pose to the integrity of Australia’s financial and regulatory systems.

    The consequences for perpetrators

    Our approach to dealing with people involved in tax crime depends on the severity and scale of the abuse.

    When we suspect that someone is attempting or has committed tax crime, we investigate and, where appropriate, refer the case to the Commonwealth Director of Public Prosecutions (CDPP) to consider prosecution under the Tax Administration Act 1953, Criminal Code Act 1995 and other laws including the Proceeds of Crime Act 2002.

    Because of the links with other crimes, we share information and collaborate with other agencies, including law enforcement agencies and our international counterparts, to detect and deal with serious abuses of the tax system.

    Those who commit serious tax crime can expect to be referred for prosecution before the courts by the CDPP.

    When someone is found guilty of an offence the courts can impose security bonds, community service orders, fines, additional penalties and, for some offences, prison sentences.

    A criminal conviction can also affect a person's employment and ability to travel outside Australia.

    People found to be engaging in money laundering or related activities may be prosecuted under the:

    • Criminal Code Act 1995 (CCA), Division 400 (dealing with the proceeds or instruments of crime).
    • Anti-Money Laundering/Counter-Terrorism Financing Act 2006 (AML/CTF Act), sections 136–143 in relation to false and misleading statements, use of falsified identities and structuring offences, including those relating to cross-border transfers
    • Financial Transaction Reports Act 1988 (FTR Act), section 31 for structuring offences relating to cash transactions.

    In addition, people engaging in identity crime activity may be prosecuted under Division 372 of the CCA, as well as the Act's general fraud and forgery provisions.

    Case study: jailed for promoting a scheme

    An accountant based in Vanuatu was sentenced to nearly nine years jail for promoting a tax scheme in Australia.

    The accountant conspired with the owner of an Australian accountancy firm to help clients evade $5 million in tax over a period of nine years.

    The round-the-world trading scheme involved eight companies whose money was sent overseas through a series of fabricated transactions and returned to the Australian company directors disguised as loans.

    The scheme was stopped after the Australian Federal Police executed search warrants, including one at the Australian accountancy firm.

    Many of the directors of the client companies as well as another accountant involved in promoting the scheme also received custodial sentences.

    Case study: seven years for share swapping

    An offender set up complex arrangements involving swapping shares in one company for shares in another, without a change in legal ownership, so intending to avoid a significant Australian capital gains tax liability.

    The offender deliberately withheld information from his accountants, culminating in him signing a tax return containing a false statement.

    The sentence handed down for the money laundering activity was seven years jail, with a total sentence of eight years and six months.

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    Last modified: 03 Aug 2015QC 41316